The latest on the Job Support Scheme (JSS) – Open for business or Closed?

Introduction

We have previously reported on the introduction and subsequent extension of the JSS, following the Chancellor’s initial announcement of it on 24 September 2020. Today we report on the further changes to the JSS announced by the Chancellor last Thursday 22 October, amid calls for improved support to protect jobs and businesses as the pandemic and government intervention to control it (in varying degrees) takes a tighter grip on our social freedoms, as well as the JSS “policy paper” that has now been published.

Replacing the Coronavirus Job Retention Scheme (otherwise known as the “Furlough Scheme”), which comes to an end on 31 October, the JSS will come into effect on 1 November 2020 and will continue for at least the next six months. It is now split into two parts:

• The “JSS Open” – for businesses which remain open; and
• The “JSS Closed” – for businesses which are required to close as a result of national or local coronavirus restrictions.

Fact Sheets on both the JSS Open and the JSS Closed and a Policy Paper have now been published, and further guidance is due to follow by the end of the month.

Overview of the financial support available

JSS Open

Provided an employee works a minimum of 20% of their usual hours (down from 1/3rd), and the employer continues to pay them as normal for those hours:

• the government will contribute 61.67% of their pay (subject to a cap of £1,541.75 per month) – up from 1/3rd; and
• the employer will have to contribute only 5% of their pay (subject to a cap of £125 per month)

for their unworked time. This means that employees will receive at least 73% of their normal pay provided they earn no more than the reference salary of £3,125 per month. Those who do earn more than this will receive proportionately less.

However, the government has said this extra level of support will be “reviewed in the new year”.

JSS Closed

Where an employee cannot work due to an employer’s obligation to close their premises as a result of coronavirus restrictions imposed by one of the UK’s four governments, they will be entitled to two-thirds of their normal pay from their employer, which will be fully funded by the government up to a cap of £2,083.33 per month.

Under both the JSS Open and the JSS Closed:

• the employer can top up the minimum payments due to employees at its discretion;
• income tax, National Insurance and pension contributions are payable on the amounts paid to the employee; and
• the employer bears the cost of all of the employer National Insurance and pension contributions.

Eligibility: General

The following eligibility criteria apply to both the JSS Open and the JSS Closed:

• The employer must have enrolled for PAYE online and have a UK, Channel Island or Isle of Man bank account.
• The employee must have been on their employer’s payroll at some point between 6 April 2019 up to 23 September 2020 (i.e. a Real Time Information (RTI) submission must have been made to HMRC in respect of them on or before 23 September 2020).However, if an employee left after 23 September 2020 and is subsequently rehired, then the employer can claim for that employee.
• An employee is someone who is categorised as such for income tax purposes and includes those on zero hours and temporary contracts.It also includes agency workers who are employees of the agency for income tax purposes.
• Employees do not need to have been furloughed under the Furlough Scheme in order to be the subject of a claim under the JSS.

Organisations that are fully funded by government are not expected to use the JSS, although those partially funded by government may do if their business is adversely affected.

There is no express statement in the Factsheets or Policy Paper on whether organisations in administration are able to utilise the JSS. Presumably where there is a prospect of retaining employees, administrators will be able to apply for the grants available, although they will need to carefully consider whether they can meet the payments due for both minimum working and non-working time under the JSS Open and/or will need to be making imminent redundancies.

Employees will be able to undertake voluntary training in their non-working hours, in respect of which they will be entitled to be paid at least the national minimum wage. It is not currently clear if employees can take up other paid employment.

The JSS will operate on a flexible basis, meaning that employees can flex on and off the scheme (and presumably between each part of it as the circumstances allow), with varying work patterns, although employers cannot claim a grant under both JSS Open and JSS Closed in respect of a single employee at the same time.

Any claim must cover a minimum period of seven (calendar) days.

Employers who claim under the JSS will still be eligible for the Job Retention Bonus for the same employees. The grant claimed under the JSS will count towards the lower earnings limit of the Job Retention Bonus.

JSS: Open for business

Viable jobs

The guiding principle of the JSS Open remains to protect “viable” jobs, and not those that continue to exist only because of the availability of the Furlough Scheme. The expectation is therefore that employees will remain in employment. Employers cannot therefore make an employee redundant whilst claiming for them under the JSS Open and, unlike the Furlough Scheme, employers are also precluded from claiming for employees who are serving a period of contractual or statutory notice.

To qualify as a viable job, employees must work at least 20% of their normal hours. For a full-time employee, this means that they need to work at least one day each week. The employer must pay the employee their normal pay for that work, and the government will pay 61.67% of the unworked hours, up to a cap of £1,541.75 per month, with the employer paying 5%, up to a cap of £125 per month (topped up at the discretion of the employer).

It is confirmed employees can undertake training in their working hours whilst being claimed for.

Which employers are eligible?

All SMEs (defined as an employer with less than 250 employees) and charities are automatically eligible for the JSS Open.

Large employers, now confirmed as those with 250 or more employees on 23 September 2020, will have to meet a “Financial Impact Test” to be eligible for a JSS grant, i.e. they must be able to demonstrate that their turnover has remained the same or has fallen due to coronavirus, before they make their first claim. This must be evidenced by VAT returns, the calculation depending on the frequency that they are filed as set out below:

• Quarterly VAT returns - compare the total sales figure on the VAT return due to be filed and paid between 31 August 2020 and 7 November 2020 with the total sales figure from the same quarter in 2019.
• Monthly VAT returns - compare the three consecutive months due to be filed and paid by 7 November 2020 with the same period in 2019.
• Less frequent VAT returns - compare the three consecutive months due to be filed and paid by 7 November 2020 with the same period in 2019. However, the employer will need to have submitted a VAT return between 31 August 2020 and 7 November 2020 to be eligible.
• Employers who are part of VAT groups should use the turnover figures for the VAT group.

The types of “wages” covered under the JSS are exactly the same as under the Furlough Scheme. Tips distributed through tronc systems, as well as discretionary and non-cash payments and non-monetary benefits, are expressly excluded.

Reference salary for employees with fixed pay

For employees who are paid a fixed salary, the “Reference Salary” for the purposes of JSS claims is the greater of the wages payable to the employee in the last pay period ending on or before 23 September 2020 and the wages payable to the employee in the last pay period ending on or before 19 March 2020 (this may be the same salary calculated under the Furlough Scheme for some employees).

Reference salary for employees with variable pay

For employees whose pay is variable, the “Reference Salary” is the greater of the wages earned in the same calendar period in the tax year 2019 to 2020, the average wages payable in the tax year 2019 to 2020, and the average wages payable from 1 February 2020 (or the employee’s start date if later) until 23 September 2020.

There are different calculations for working out an employee’s usual hours – fixed or variable.

Usual hours for employees with fixed hours

For employees contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work, “usual hours” are calculated based upon the greater of the hours that the employee was contracted for at the end of the last full pay period ending on or before 23 September 2020 or the hours that the employee was contracted for at the end of the last full pay period ending on or before 19 March 2020 (this may be the same number of hours calculated under the Furlough Scheme for some employees).

Employees who work variable hours

For employees whose hours vary and/or whose pay depends on the number of hours they work, “usual hours” are calculated based on the higher of the number of hours worked in the same calendar period in the tax year 2019 to 2020, the average number of hours worked in the tax year 2019 to 2020, and the average number of hours worked from 1 February 2020 (or the employee’s start date if later) until 23 September 2020.

JSS Closed

The JSS Closed is essentially a re-model of the Furlough Scheme, with employers being able to claim back from the government two-thirds of an employee’s normal pay where they cannot work because of government-imposed restrictions, capped at £2,083.33 per month per employee.

Employers are however only eligible to claim under the JSS Closed if their business premises have been legally required to close as a direct result of coronavirus restrictions set by one or more of the four governments of the UK. This includes premises restricted to delivery or collection only services/to provision of food or drink outdoors, but it does not include premises required to close by local public health authorities as a result of specific workplace outbreaks.

Eligible employers will be able to claim the JSS Closed grant for employees employed primarily at the premises that have been legally required to close. This would appear not to cover “head office” employees who do not work at the premises that has been closed.

Larger employers do not appear to need to meet any financial impact test to be eligible for the JSS Closed. However, the government expects that large employers and their corporate groups using the scheme will not make capital distributions whilst claiming a grant (either JSS Open or JSS Closed) – although “the government does not plan to make this expectation a contractual or legal condition of the scheme”.

Agreement with the employee

It is now confirmed that for both the JSS Open and the JSS Closed the temporary changes to an employee’s working arrangements have to be agreed in writing with the employee or any recognised trade union – not just agreed and notified to them in writing.

Employers must keep a written record of the agreement reached for at least five years and “HMRC will publish further guidance on what to include in the written agreement by the end of October” – which is of course not helpful for employers hoping to have their employees signed up to the JSS by the time it opens/the Furlough Scheme closes.

Claims commence from the later of the date that the employee starts working reduced hours and the date when working reduced hours is confirmed in writing (not when the decision is made).

Redundancies

The Policy Paper makes clear that an employer cannot make an employee redundant or serve them with notice of redundancy whilst claiming for them under the JSS. However, this suggests that employers may be able to commence redundancy consultation and place employees at risk of redundancy whilst still claiming the grant. Those employers who intend to issue notice of redundancy will need to do so after the end of any claim period.

Claiming under the JSS

Employers will be able make their first claim from 8 December 2020 covering pay periods ending and paid in November 2020. Subsequent months will follow a similar pattern, with the final claims for April 2021 being made from early May 2021.

Because grants will only be payable in arrears, a claim can only be submitted after payment to the employee has been made in respect of a particular pay period and reported to HMRC via an RTI return.

Penalties

Penalties of up to 100% of any amount overclaimed may be applied and HMRC will consider publishing the details of employers who are charged a penalty because of a deliberately incorrect grant claim. HMRC intends to publish the names of employers who have used the scheme, clearly to encourage the reporting of fraud.

Unanswered questions and outstanding issues

Some questions still remain unanswered. We hope that these points will be addressed when we receive the promised further guidance at the end of this month. They include:

Holiday and other benefits

We anticipate that statutory holiday (at least) will continue to accrue on the basis of normal hours whilst an employee is either on short time working under the JSS Open or laid off under the JSS Closed. However, this is still to be confirmed, as is whether a day’s holiday will count as a day’s working time under the JSS Open.

In respect of any other contractual benefits, we expect that this will need to be the subject of consultation and negotiation between the employer and employee, although we await further clarification.

Other jobs

As noted above it is still uncertain whether employees will be able to take secondary employment to fill the gap between their normal and part-time/non-working hours, as they can under the Furlough Scheme. If so, presumably it will be on the basis that their employer agrees.

Absences

We also await clarification on how the JSS will work in the context of those who are self-isolating, shielding, or on other leaves of absence (such as family leave or sickness absence with enhanced pay). The Policy Paper states that the government will introduce parental pay legislation as soon as possible “to avoid parents losing out on their entitlement to parental pay as a result of being put on the Job Support Scheme during the relevant assessment period” and “more details on employee eligibility” will be included in the further guidance.

Conclusion

For many businesses, these new financial interventions are welcome news. However, for those employers who are not forced to close by government but rather due to lack of trade, the JSS will be of little use. Nevertheless, the government has also announced the introduction of additional grants of up to £2,100 per month for businesses in Tier 2 areas which are not legally required to close but have been adversely affected by the restrictions imposed in these areas. This funding will be provided to local authorities based on the number of hospitality, hotel, B&B, and leisure businesses in their area. The local authorities will then determine which businesses are eligible. Whether this will offer any comfort to those businesses falling between the two parts of the Job Support Schemes remains to be seen.